WINNER-TAKES-ALL IN THE BATTLE FOR E-WALLET SUPREMACY
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WINNER-TAKES-ALL IN THE BATTLE FOR E-WALLET SUPREMACY
INTRODUCING THE BATTLE FOR E-WALLET SUPREMACY
A fierce battle is raging to dominate e-Wallets1 in Southeast Asia – a market of 600 million
consumers who are increasingly using mobile Internet and becoming comfortable with
digital financial services. In recent years, e-Wallets have been launched in the region by
telecommunications providers, banks, merchants, device manufacturers, transportation
providers, remittance players, and consumer tech firms. Now, they are competing
aggressively to be adopted by both consumers and merchants. While e-Wallets still account
for a small proportion of non-cash payments today, they are forecast to grow rapidly. Mobile
payments in the ASEAN region are expected to reach $30 Billion by 20212, and e-Wallets will
capture a significant part.
The battle is being waged across borders and there has been a flurry of recent activity.
Tencent’s WeChat Pay and Ant Financial’s Alipay have expanded into Southeast Asia, initially
targeting Chinese travellers and communities. Grab-Pay (Grab) is creating a regional
payments platform, and Go-pay (Go-jek) might do so too. E-payment alliances are being
formed, such as that between Singtel and Razer, which are aiming to create the largest
e-payments network in Southeast Asia.
Despite the increasing investment flowing into these new e-Wallet businesses, not all will
survive. To stand a chance of success, e-Wallet operators and their investors will need robust
business models that can sustain competitive differentiation and scale rapidly. In markets
such as Kenya and China that are well past the tipping point for mass adoption of e-Wallets,
the evidence is clear: This is a winner-takes-all business, in which the top two players
capture over 80 percent of the market. That means e-Wallet operators need to figure out
how to emerge on top. And as e-Wallet adoption increases among the banked population,
strategic questions arise for banks, which have much to lose. Payment flows may shift away
from their credit and debit cards onto stored-value wallets. Even if cards are still the wallets’
funding source banks still lose visibility of payments behaviour when an e-Wallet is used.
Some banks may choose to compete directly with their own e-Wallets; others may stay away
from this competition, but will still need a strategy to respond to the threat. Regardless of
their approach, banks need to determine how to compete and collaborate with these new
e-Wallet payment instruments and where to place their bets.
We have drawn a number of insights from our work in this area and identified some business
models that may emerge as winners.
1. E-Wallets or digital or mobile wallets are types of payment instruments that can be used to transact at physical locations and online.
These wallets can be linked to debit cards and credit cards or to a bank account, and can also be loaded with a sum of money, called
“stored value”. In some instances, e-Wallets can also store cryptocurrencies, however this paper focuses on non-cryptocurrency usage
of e-wallets.
2. Euromonitor International
1MARKETS AT VERY DIFFERENT STAGES OF EVOLUTION
In China, e-Wallet adoption was driven by Alibaba and Tencent. It passed a tipping point
early this decade, setting a precedent for evolution in Southeast Asia. Globally, MPesa
in Kenya, launched by Safaricom from a pilot scheme in 2005, is considered the most
successful example of an e-Wallet becoming a ubiquitous payment-and-remittance
instrument for an underbanked population in a market with limited banking infrastructure.
Markets in Southeast Asia are at different stages of evolution, and different e-Wallet business
models are emerging. For instance, the Philippines is on the cusp of a digital payments
revolution, and non-cash payment methods – particularly e-Wallets – are expected to
surge to Six percent of payments by 2022. The two leading players in that market, Globe’s
GCash and Voyager’s PayMaya, are concurrently building user bases and use cases for the
underbanked, who are rapidly adopting smartphones.
Exhibit 1: Share of non-cash payments (of consumer payments) and penetration of e-wallet
payments within non-cash payments
VALUE OF NON-CASH TRANSACTIONS
AS PERCENT OF TOTAL CONSUMER PAYMENTS
56
50 50
45
30
27
24 24
18
12
2016
2012
USA China Indonesia India Philippines
Sub-segment Percentage of total consumer payments (by value, 2016)
Non-cash 50 30 25 24
E-wallets 13 0.1 1Exhibit 2: Estimated growth of consumer payments by value (in US$ Billion) in
the Philippines
PROPORTION OF CONSUMER PAYMENT INSTRUMENTS BY TOTAL PAYMENTS
(BY VALUE) 2012-2022E, US$ BILLION
CAGR CAGR
(2012–2017) (2017–2022E)
362
331 6% N/A E-Wallet 116%
303 5%
18%
276 3%
19% 14% Cards 9%
252 2%
19%
232 1% 10%
19% 9%
216 19%
199 8% 19% 17%
185 18% 8% ACH
172 18% 7%
159 17% 7%
15%
14% 6%
14% 5% 6%
5% 6% Cash 7%
4%
82% 82% 80% 78% 76% 75% 73% 71% 69% 68% 66%
2012 2013 2014 2015 2016 2017E 2018E 2019E 2020E 2021E 2022E
Euromonitor International
WINNING E-WALLET BUSINESS MODELS
Not all e-Wallets are equal: A variety of models could prove winners, depending on the
market context, the behaviour of the target consumers, and regulations. As e-Wallets
proliferate in the region, it is imperative to understand which players and business
models will win the battle for supremacy. We analysed the underlying business models
and economic drivers of success for the most prominent e-Wallet archetypes. We then
categorized them according to type – whether the e-Wallet is standalone or part of an
ecosystem; and to target customer – whether they are banked or underbanked/unbanked.
ARCHETYPE A: FINANCIAL INCLUSION
This e-Wallet targets the unbanked and underbanked and provides a digital alternative to
physical cash. It is likely to be one of its customers’ first experiences with formal financial
services. For the unbanked, it is the closest substitute to a bank account and its main
use cases will be cash in/cash out, domestic and cross-border remittances, and limited
payments such as prepaid mobile top-ups. The primary revenue drivers are fees charged for
these use cases. We see opportunities for e-Wallet providers to make this model profitable at
scale, especially when they have pricing power due to limited alternatives. A wide network
3of agents for last-mile distribution is a key factor for success, though the network needs to
be efficiently managed so as to reduce costs and operational risk. Trust and security are also
critical, as fraud can be a risk when agents provide transaction support to first-time users of
formal financial services (agents may take a certain sum of money in cash from the customer,
but deposit a lower sum in the e-Wallet)
This archetype is relevant to countries in the region that have low banking penetration
but high – and rising – mobile internet penetration. E-Wallets led by telecommunications
companies can be successful thanks to their broad networks of agents. For example, Wave
Money in Myanmar has 1.3 million customers and access to a network of more than 20,000
agents through its partners Telenor and Yoma Bank. In contrast, Myanmar’s largestprivately-
owned bank has just 500 branches.
The challenge for these players is to scale rapidly while sustaining revenue margins. Cash-in
fees decline over time and remittance corridors attract significant competition both from
traditional incumbents turning to digital services and from new digital businesses. TNG in
Hong Kong, for example, offers an e-Wallet that caters predominantly to domestic workers
from the Philippines and Indonesia who remit income back home.
ARCHETYPE B: DIGITALLY ENABLING THE UNDERBANKED
Leading players provide a fuller suite of quasi-banking services to the unbanked and
underbanked. The e-Wallet becomes the critical instrument for increasing the number
of payment use cases, and winners may be those that provide value-added solutions
that go beyond payments. For example, they might offer credit or provide simple advice
on spending and budgeting. Agent networks will still be needed to address the cash-in
challenge to encourage adoption and usage. We observe providers increasingly absorbing
the costs of cash in and instead deriving revenues from merchant transactions. They could
also potentially obtain revenues from the float as digital money is retained in the ecosystem.
Low-cost payment infrastructure, such as QR codes, could attract smaller offline merchants.
In markets that receive large numbers of overseas remittances, there are opportunities to
drive cash flow into the system by positioning the e-Wallet to “catch” money remitted from
overseas wallets.
This archetype is currently most relevant in markets such as Indonesia, the Philippines, and
Vietnam, where consumer platforms are rapidly expanding in scale. For example, Go-pay
in Indonesia started with digital payments for rides hailed on Go-jek but has expanded to
include food delivery and offline retail payments. Moreover, Go-jek drivers act as agents,
accepting cash for top-ups as well as Alfamart counters.
The challenge for participants in this space is to become useful enough in daily life that
customers adopt their e-Wallets, use them regularly, and therefore retain funds in them. As
the underbanked increasingly use new consumer platforms, they will come to expect more
than basic e-payment capabilities. Then, what worked for a financial-inclusion player may
no longer be compelling enough to be competitive. This can be seen in Indonesia, where
e-Wallets led by telecommunications companies are battling Go-pay.
Copyright © 2018 Oliver WymanRegulatory change may also facilitate the development of new e-Wallet services. The Hong
Kong Monetary Authority (HKMA), for example, has announced that it will issue virtual
money licenses, enabling an e-Wallet player under a Stored Value Facility License to start
offering deposit and credit-related services for those currently excluded from mainstream
banking services.
ARCHETYPE C: PAYMENT CONVENIENCE
E-Wallet operators target banked segments of the population, positioning their e-Wallets
as a convenient payment instrument to drive loyalty and usage. Various models exist. The
e-Wallet can store credit and debit card data so that those cards can be used for mobile
payments – for example in a device wallet such as Apple Pay. Or the e-Wallet draws funds
into a stored-value facility that is used to make mobile payments – such as DBS’s PayLah.
Revenue is derived from the interchange fees when the e-Wallet is used to make a mobile
payment at a merchant and from monetising the rich transaction data gathered when the
e-Wallets are used. In the device wallet model, card issuers compete to be selected by
consumers as the primary card stored in the e-Wallet, just as they compete to be the card
of choice in consumers’ physical wallets. Some merchants, too, have launched their own
e-Wallets: These are typically closed-loop and can only be used to make purchases at that
merchant. A leading example is the Starbucks mobile app in the US, but this model has been
less prevalent in Asia. For the merchant, a closed-loop e-Wallet reduces payment processing
costs and provides more control over the customer buying process. Merchants can then use
the rich transaction data to make targeted offers that foster loyalty.
Exhibit 3: Prominent e-Wallet archetypes
ECOSYSTEM PLAYERS
B. Digitally enable under-banked D. Lifestyle payment partner
Serve cash centric segments, enable As part of a larger ecosystem, the
services such as ride hailing, m-commerce, wallet becomes “lifestyle enabler”
offline retail etc. Customers avail some for payments within key ecosystems
services using cash, but wallets provide (eCommerce, travel, etc).
convenience and greater access. E.g. WeChat Pay, Alipay in China
TYPE OF E-WALLET
E.g. GoPay in Indonesia
STANDALONE WALLET
A. Financial Inclusion play C. Payment convenience
Serve underbanked markets with Aggregates multiple debit and credit
standalone wallets, which act mainly cards and/or provides standalone
as substitutes for bank accounts and stored value (as a replacement for
enable simple use cases (telco cash) to conveniently replicate a
top-up, urban-rural P2P payments). physical wallet.
E.g. Wave Money in Cambodia E.g. DBS Paylah in Singapore
UNBANKED BANKED SEGMENTS
TARGET CUSTOMER SEGMENT
5We see this archetype emerging in more-developed markets such as Singapore, Malaysia,
and Thailand. DBS PayLah has had considerable success in Singapore thanks to its ease
of use and a growing base of merchants. It is particularly convenient for small food-and-
beverage payments at food courts in Singapore.
The main challenge is to monetise the wallet itself, as the banked user base is less willing
to pay for the convenience of an e-Wallet. Driving loyalty and visibility into daily spend
behaviours are typical motivations for customers. Successful players are the ones that
deliver a superior customer experience compared with other forms of payment. They sign
up merchants in a cost-effective manner and offer value-added features such as spend
tracking and budget analysis. Neat in Hong Kong provides a prepaid account along with
value-added services such as the categorisation of expenses to provide a clear analysis of
spending patterns.
ARCHETYPE D: LIFESTYLE PAYMENT PARTNER
This is the target end-state for many e-Wallet providers, but few have achieved it, especially
those led by banks. While banks might aspire to dominate in this area, the emerging leaders
are instead large, frequently-used consumer tech platforms, such as messaging platforms
and e-commerce companies. They merge e-Wallet capabilities into their core offerings,
encouraging captive users to adopt their e-Wallets for payments on their platforms. The
monetisation of these e-Wallets does not have to come directly from payments but can
instead be the result of increased average revenue per user. Transaction data can be
leveraged to offer services that go beyond payments, such as micro-credit and credit ratings.
To drive rapid adoption and frequent use, these players are often among the most aggressive
in their pricing of payment services.
The greatest success cases for this archetype are in China, where Alipay and WeChat Pay
have become indispensable in the daily lives of millions of consumers. For example, Ant
Financial uses Alipay transaction data to build a credit score for users, which it can then
monetise either by offering credit directly to users or by providing the score to other
financial institutions.
The challenge is to deliver business returns that justify the substantial investments required
to become one of the favoured e-Wallets. Regular engagement may need high marketing
costs and the funding of loyalty programs, so it is critical to be able to generate profitability
in areas beyond payments. While the leading Chinese players are actively expanding beyond
their national borders, other platform players are emerging in Southeast Asia too. One
example is Grab, which offers its GrabPay wallet and credit solutions alongside its core ride-
hailing services. With seamless local and cross-border payment functionality and rapidly
scaling merchant acceptance, GrabPay already has a large, loyal customer base in multiple
markets as it competes for dominance in e-Wallets.
Meanwhile, other players, such as Singtel, are aiming to achieve scale and relevance by
connecting multiple e-Wallets in different markets to create an interoperable pan-Southeast
Asian e-Wallet payment network. Singtel has already announced its intention to connect
Copyright © 2018 Oliver Wymanits Dash wallet with other telco-led wallets in the region – for example, AIS’s mPay wallet in
Thailand and Globe’s GCash in the Philippines.
The table below summarise the business model characteristics and economics models for
successful plays in each of the archetypes.
Table 1: Comparison of e-wallet archetypes
FINANCIAL DIGITALLY ENABLE PAYMENT LIFESTYLE
INCLUSION PLAY UNDERBANKED CONVENIENCE PAYMENT PARTNER
KEY SUCCESS •• Widespread •• Simplified and •• Wide merchant •• Conversion of
FACTORS agent network low-cost cash-in to acceptance network customers in the
and user base for incentivize loading •• Superior customer core ecosystem to
network effect •• Multiple use cases service and e-wallet users
•• Trust and to keep customers experience with •• Focus on
brand recognition engaged and added functionality “beyond payment”
wallets funded e.g. spend tracking opportunities
•• Merchant/agent & analysis •• Monetize e-wallet
network (often data to provide
merchants double adjacent services
as agents) to
drive adoption
REVENUE •• Fees and •• Merchant •• Merchant •• Higher
DRIVERS commissions interchange and interchange and engagement/
from cash ins/cash float income float income loyalty to core
outs, remittances •• Limited micro- •• Achieving “top- ecosystem solution
and airtime credit referrals/ of-wallet” status •• Merchant
top-ups credit scores for credit/debit interchange and
cards stored in fees for beyond
the e-Wallet payment services
(e.g. credit)
COST •• Agent fees •• Merchant •• Merchant •• Merchant
DRIVERS and cash acquisition costs, acquisition costs acquisition costs
management costs agent fees and cash (e.g. for QR •• Marketing spend
management costs code enablement) to support
acquistion/
engagement
•• Funding of
loyalty programs
7THE TIME FOR ACTION
The tipping point for the mass adoption of e-Wallets in Southeast Asia is hard to predict.
However, trends in consumer behaviour and technology, as well as the evolution of
ecosystem-based financial services, all point to rapid acceleration in the next three
to five years. Adoption will be affected by developments such as real-time payments
infrastructure, the low-cost acquisition of merchants, regulations for e-Wallet onboarding,
and transaction value thresholds. These could fundamentally change the shape of the retail
payments landscape.
The battle for supremacy in e-Wallets will be fierce and a few large-scale players are likely to
become dominant in the banked and unbanked segments. E-Wallet investors and operators
need to develop business models that they can scale successfully; otherwise they risk
becoming irrelevant to their target audiences and falling by the wayside.
Viral adoption by users – as well as merchants and agents – will be needed to generate
network effects for the four archetypes identified. For the financial-inclusion and digitally-
enabled-underbanked archetypes, cash-in and cash-out services are key to usage and
can be monetised by the e-Wallet provider together with other simple payment activities.
These revenues will be needed to support the costs of building and managing an expansive
agent network. But in the banked segment, monetising payments will be difficult. Success
in the payment-convenience and lifestyle-payment-partner archetypes will result from
generating engagement and loyalty for the core offering from the banking or consumer tech
platforms. More engagement will produce more transaction data, which will form the basis
for analytical insights. These will support sales of other services to the client base, such as
credit-related products and financial advice.
Success will require investors and operators with deep pockets. It will be expensive to
develop large networks, create ubiquitous payment use cases, attract users and motivate
frequent usage. Monetisation will be hard and take a long time, but there are huge potential
rewards for becoming the payment instrument of choice for a target segment. Meanwhile,
banks and other existing payments players cannot just sit on the side-lines. If e-Wallets
become the instrument of choice for small-ticket payments, incumbents will have to defend
their turf in other retail payments. So, banks need to make important strategic choices about
where and how to compete. That means deciding whether to participate directly with their
own e-Wallets – or else ensuring that their own payment solutions are seamlessly integrated
into the wallet platforms of the future winners.
Copyright © 2018 Oliver WymanOliver Wyman is a global leader in management consulting that combines deep industry knowledge with specialized expertise in strategy, operations, risk management, and organization transformation. For more information please contact the marketing department by email at info-FS@oliverwyman.com or by phone at one of the following locations: ASIA PACIFIC AMERICAS EMEA +65 6510 9700 +1 212 541 8100 +44 20 7333 8333 AUTHORS Duncan Woods Nihal George Anosh Pardiwalla Partner and Head of Retail Principal, Digital, Technology Associate, and Business Banking, APR and Analytics, APR Financial Services Duncan.Woods@oliverwyman.com Nihal.George@oliverwyman.com Anosh.Pardiwalla@oliverwyman.com www.oliverwyman.com Copyright © 2018 Oliver Wyman All rights reserved. This report may not be reproduced or redistributed, in whole or in part, without the written permission of Oliver Wyman and Oliver Wyman accepts no liability whatsoever for the actions of third parties in this respect. The information and opinions in this report were prepared by Oliver Wyman. This report is not investment advice and should not be relied on for such advice or as a substitute for consultation with professional accountants, tax, legal or financial advisors. Oliver Wyman has made every effort to use reliable, up-to-date and comprehensive information and analysis, but all information is provided without warranty of any kind, express or implied. Oliver Wyman disclaims any responsibility to update the information or conclusions in this report. Oliver Wyman accepts no liability for any loss arising from any action taken or refrained from as a result of information contained in this report or any reports or sources of information referred to herein, or for any consequential, special or similar damages even if advised of the possibility of such damages. The report is not an offer to buy or sell securities or a solicitation of an offer to buy or sell securities. This report may not be sold without the written consent of Oliver Wyman.
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